The falling Australian dollar, coupled with an interest rate cut, has given farmers cause for optimism in 2015.HISTORICALLY low interest rates, a weakening Australian dollar and strengthening commodity prices should place farmers in a strong financial position going into the 2015 season.
On Tuesday last week the Reserve Bank of Australia cut the cash rate by 25 basis points to a record low of 2.25 per cent.
And, some forecasters are saying there is the chance of another 0.25pc interest rate cut from the RBA later this year.
Last week’s rate cut triggered a drop in the value of the dollar to below US80 cents. The dollar has now experienced a 20pc depreciation in the past six months, helping make Australian products more attractive to overseas buyers.
ANZ state agribusiness manager SA & NT Stephen Radeski said there were positive signs for farmers going into the 2015 season.
“Our general view is that despite areas of seasonally low rainfall, notably the South East where pressure on feed reserves continues unabated, farmers are entering 2015 in reasonably strong shape,” he said.
“Despite a poor finish to last season, grain producers are reflecting on an above-average crop and reasonably strong commodity prices.
“Northern pastoralists, while still feeling the impact of recent drought conditions have relished recent good rainfall, and although further is required, the supply/demand equation for beef in particular has underpinned strong prices in the sector.
“We also expect sheep meat prices to continue to improve.
“From a banking point of view, the deposit inflow and subsequent debt reductions were higher than last season, which is an excellent indicator for the industry.”
In a report released this week, Rabobank said five key factors will be critical in shaping the outlook for Australian agriculture through 2015.
In its Agribusiness Outlook 2015, Rabobank says – along with weather conditions – the exchange rate, oil prices, trade policy and the Chinese economy will be the key influences on the fortunes of agriculture in the coming year.
Rabobank analyst Georgia Twomey said a weaker $A appears likely to lend considerable support to Australian food and agricultural exporters in 2015.
“The appreciation of the US$ is expected to continue in 2015, something that is positive for Australian food and agricultural exports,” she said.
Lower world oil prices are also generally expected to be a boon for farmers, lowering input prices and stimulating global economic growth. However, the report cautions, this factor could also have a “sting in its tail”, given many agricultural commodity prices often tend to track in a similar direction to oil.
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